Pharma Giants Pledge Billions in U.S. Investments Amid Tariff Threats, but Experts Doubt Feasibility of Production Reshoring

According to Xinhua News Agency, U.S. President Trump arrived in the UK on September 16 for a state visit. This is also his second state visit to the UK as the U.S. President.

On the same day, British pharmaceutical company GSK China pledged to invest $30 billion in the United States over the next five years. This is not the first international pharmaceutical company to announce investments in the U.S. Previously, Trump had threatened to impose tariffs on imported drugs and complained about the high prices Americans pay for medications.

However, Huang Yanzhong, Senior Fellow for Global Health at the U.S. Council on Foreign Relations and Professor and Director of the Center for Global Health Studies at Seton Hall University's School of Diplomacy and International Relations, told the First Financial Daily that if the U.S. government intends to push pharmaceutical companies to relocate production back to the U.S. or nearby countries, it would be "unnecessary, costly, and even somewhat unfeasible to a certain extent," as the U.S. is highly dependent on overseas supply chains for drug production.

International Pharmaceutical Companies Invest in the United States

The United States accounts for approximately 50% of GSK's revenue. Emma Walmsley, CEO of the company, stated earlier this year that GSK plans to invest tens of billions of dollars in the U.S. over the next five years, prioritizing the country as its "top market." Specific initiatives include constructing a $1.2 billion biologics plant in Pennsylvania and enhancing artificial intelligence and advanced manufacturing capabilities at existing U.S. production sites. The remaining funds will be allocated to drug research and development and clinical trial support.

According to the梳理of the White House website by the First Financial Reporter, since the beginning of this year, under the pressure of US tariff threats and other policies, several pharmaceutical companies have announced investment plans in the United States involving manufacturing, R&D, and supply chain expansion.

For example, in February this year, the U.S. pharmaceutical company Eli Lilly announced an investment of $27 billion in the U.S., which will include building three active pharmaceutical ingredient factories and one injectable factory, doubling its manufacturing capacity in the U.S. In March, Johnson & Johnson announced a $55 billion investment over four years, covering manufacturing, R&D, and technology. U.S.-based LGM Pharma plans to invest $6 million to expand its manufacturing facilities in Texas. Merck & Co. plans to invest $9 billion by 2028 for new plants in North Carolina, a biologics plant in Delaware, and other product and R&D pipelines. India-based Celgene International announced a $36.5 million investment to acquire a biologics manufacturing plant in Baltimore.

In April, Swiss pharmaceutical company Novartis planned to invest $23 billion over five years. Fellow Swiss company Roche committed to investing $50 billion within the same timeframe. U.S.-based AbbVie plans to invest $10 billion over the next decade to add four manufacturing plants in the U.S. In the same month, biotech firm Amgen announced a $900 million investment in Ohio. Thermo Fisher Scientific announced it will invest $2 billion over four years to enhance its U.S.-based manufacturing operations and drive innovation.

In May, France's Sanofi announced a plan to invest $20 billion by 2030 to enhance manufacturing and R&D capabilities. Bristol Myers Squibb stated it would invest $40 billion over five years in R&D, technology, and U.S.-based manufacturing. Gilead Sciences plans to add an $11 billion investment (totaling $32 billion) for the development and construction of drug manufacturing centers in California and two other facilities. Merck Animal Health will invest $895 million to expand its manufacturing operations in Kansas. In June, Hikma Pharmaceuticals committed $1 billion to expand its U.S.-based manufacturing and research capabilities.

In July, British pharmaceutical company AstraZeneca committed to investing $50 billion by 2030 to build a new active pharmaceutical ingredient factory in Virginia and expand facilities across five states. Biogen announced a $2 billion investment to expand its facility in North Carolina's Research Triangle Park.

However, behind this wave of industry returning to the U.S., there are significant policy interventions and strategic concerns. Huang Yanzhong told the First Financial reporter that the U.S. pharmaceutical industry is highly dependent on active pharmaceutical ingredients (API) and generic drugs from overseas. If tariffs are imposed, it may not only prevent the reduction of drug prices in the U.S. but also impact the accessibility of medicines.

More alarmingly, Huang Yanzhong stated: "The cost of new drug research and development for U.S. pharmaceutical companies is extremely high, with past development of a single new drug potentially costing nearly $1 billion and requiring many years. Nowadays, some U.S. pharmaceutical companies are reducing costs by licensing new drugs developed in China, a model that significantly cuts R&D expenses. In this sense, if the U.S. government demands both price reductions from American pharmaceutical companies and local production, it may force these companies to further outsource R&D to foreign countries to maintain cost advantages. This could instead deepen reliance on overseas R&D, running counter to the original intention of their localization strategy."

Insufficient Support from the UK Government

UK Prime Minister Starmer expressed support for GSK's investment, considering it a model of UK-US cooperation. However, at the same time, the UK pharmaceuticals industry is facing significant risks of investment outflow.

Currently, the ongoing negotiations over drug price control disputes between the UK government and pharmaceutical companies have yet to yield results. According to reports, the UK's "Voluntary Scheme for Branded Medicines Pricing, Access and Growth" (VPAG), which will take effect in 2024, requires pharmaceutical companies to return 23.5% to 35.6% of their branded drug revenue to the National Health Service (NHS). This rate is much higher than the levels in other European countries such as France (5.7%) and Germany (7%).

This mechanism aims to control the growth of NHS drug expenditure. However, in fact, John Bell, an outstanding professor of pharmacology at the University of Oxford, stated that the proportion of overall NHS drug spending has dropped from 15% 15 years ago to the current 9%, lower than the level in other OECD countries (which remains between 14%-20%).

Against this backdrop, on August 22, the Association of the British Pharmaceutical Industry (ABPI) announced that price negotiations with the government over the VPAG scheme had officially broken down. The association's chief executive, Richard Torbett, stated that this deadlock would hinder patients' access to new drugs, suppress industry growth, and put the UK at a disadvantage in global life sciences investment. The industry has warned,If the rebate rate remains above 20%, the UK could lose approximately £11 billion (about 106.6 billion yuan) in R&D investment by 2033.。

Recently, several multinational pharmaceutical companies have taken action. Merck & Co. has canceled a £1 billion research hub project in London, which was originally scheduled for completion in 2027 and had already begun construction. Additionally, the company will close its London Bioscience Innovation Centre and its site at the Francis Crick Institute by the end of the year. A spokesperson for Merck cited "slow progress in UK government investment in life sciences and successive UK governments' underappreciation of innovative drugs" as reasons for the decision. Recently, AstraZeneca also announced the suspension of a £200 million expansion plan for its Cambridge research site. In January, AstraZeneca canceled a £450 million investment plan for a vaccine manufacturing plant in northern England.

(This article is from Yicai)